North Island weather events to drive up NZ inflation
North Island weather events to drive up NZ inflation | Insurance Business New Zealand
Catastrophe & Flood
North Island weather events to drive up NZ inflation
Fresh produce shortage to spike inflation in March and June quarters, says Treasury report
Catastrophe & Flood
By
Miko Pagaduan
A new Treasury report has indicated that New Zealand’s inflation is expected to rise by 0.4% in the March and June quarters due to the recent weather events in the North Island, which led to fresh produce shortages.
According to the report, flood-reduced supply, particularly for fresh produce, will add to inflation.
The annual rate of food price inflation hit 12.1% in March, the highest rate since 1989. The report estimates that the recent weather events caused up to $14.5 billion in economic damage, with significant losses across households, businesses, and infrastructure.
Treasury says that households and businesses were impacted by losses of up to $3.5 billion each, while infrastructure losses amounted to more than half of overall damage, for an estimated $9 billion hit potentially rising to $14.5 billion.
The actual repair bill will depend on choices as to whether to replace assets or whether to “build back better.”
The report estimates losses from agriculture and horticultural crops as the “dominant driver” of its predicted $400 million to $600 million loss of output in the first half of 2023.
Insurance claims and coverage
The recent weather events have also led to massive insurance claims.
The Insurance Council of New Zealand (ICNZ) has stated that it is settling claims worth more than $2.5 billion as a result of the two climate events earlier in the year.
“The value of those two events alone is around 80% of total claims paid by members for all of 2022,” said ICNZ chief executive Tim Grafton. He also stated that insurance claims are “money the government doesn’t have to find.”
“There’s multiple benefits of insurance, and not just for the insured, but government’s as well. We are quick contributors and payers. We have already paid out hundreds of millions of dollars for those two events, and that would far exceed any other monies coming into the affected regions,” Grafton added.
The January floods and Cyclone Gabrielle are the two largest losses from extreme weather events in New Zealand “by a country mile,” according to Grafton. He believes that the government should take note of the importance of insurance coverage, as it can quickly provide much-needed financial assistance in times of crisis.
The recent weather events have caused widespread damage and disruption across New Zealand. The Treasury report highlights the need for careful consideration when making decisions regarding the replacement of damaged assets.
While the repair bill is expected to be substantial, insurance coverage has already provided much-needed financial relief for many affected households and businesses.
The impact of extreme weather events on New Zealand’s economy and society underscores the importance of taking measures to mitigate and adapt to climate change.
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